The Insurance Council of Australia has declared an "insurance catastrophe" as the industry braces for a spike in coronavirus-related claims while policies largely exclude quarantinable diseases.
Business interruption insurance policies typically cover staff wages and rent or loan repayments during catastrophic events. In the past, this extended to infectious diseases but in 2004, the global insurance industry began to introduce exclusions for losses relating to quarantinable diseases, according to the ICA.
ICA spokesman Campbell Fuller said while there was not a one-size-fits-all approach to insurance policies, and some individualised policies may include pandemic cover, most business insurance products exclude pandemics simply because the uncertainty of the risk is too high.
"Insurers are always about calculating the risk, how do you calculate the impact of the pandemic?"
Dark Mofo is Australia’s first major event to be cancelled as a result of the coronavirus. Credit:Remi Chauvin
Mr Fuller said businesses would be priced out of insurance if generic policies extended to all unpredictable events – such as pandemics and civil war. "If you want insurers to cover everything you're going to have to have very deep pockets."
While the extent of potential coronavirus-related claims are not known at this point, the council has set up a taskforce to measure the number of coronavirus-related claims to inform the industry position in the future.
Insurance giant IAG said the spread of human and infectious diseases was among general exclusions that may impact cover, but a spokesperson said IAG had received less than five coronavirus-related claims for business interruption and said these would be assessed on a case-by-case basis.
"We encourage any business with questions on scope of their cover to contact their broker or insurer," the IAG spokeswoman said.
Cities around the world have been sent into lock-down to prevent the spread of the deadly virus that has now infected more than 118,000 people in 114 countries and has caused events to be cancelled and businesses to shutter their doors.
Tasmania's winter folk festival Dark Mofo is the first of Australia’s major events to be cancelled with art mogul David Walsh declaring he would "rather be a rich coward than a poor hero".
"Right now, the government and [Hobart's contemporary museum] Mona are each on the hook for $2 million to run Dark Mofo. That’s bad," Mr Walsh said in a statement.
While Mr Fuller said there is sometimes an expectation gap between policyholders and the extent of what is covered, the information about exclusions are embedded in product disclosures and communicated by insurance brokers.
"This is actually an opportune time for businesses to examine their risk identification processes and talk to their insurance brokers about their specific needs and the ways in which insurance can help them offset or manage those risks."
His warning comes as the federal government has launched a $17.6 billion economic stimulus designed to provide tax relief for small business and money to help keep apprentices in work.
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